Tag Archives: Free

There’s been a lot of talk and understandable dissent surrounding Apple’s free tier payment of the reported .002 per play during each consumers 90 day free trial period. We now live in a world of lessor evils.

Here are three things that we may want to keep in mind…

One:

Eliminating the Unlimited Free, Ad-Supported, On-Demand Access to Music is Job #1. Apple Music and Tidal are both positive steps in that direction.

Two:

.002 is DOUBLE .001 which is what Spotify is paying on it’s ad-supported free tier (see chart below). Yes, we’d love Apple to pay the full ride. Yes, Apple can afford to pay the full ride. Yes, we support any action that influences Apple to pay the full ride – but as a compromise we could be doing worse, and in fact we have been for over five years since the Spotify launch.

Three:

90 Days is Limited. Ad-Supported is forever. This is the big problem. Even if Spotify was limiting their ad-supported free tier to 90 Days, Apple is still paying DOUBLE. But the real problem is that Spotify is FREE FOREVER. It’s time to keep the eye on the prize here.

Three Steps to a Sustainable Digital Music Ecosystem:

1) Eliminate the Unlimited Free, Ad-Supported, On-Demand Access to Music

2) Windowing

3) Tiered Pricing, based on Access and Consumer Value Proposition

That’s really it. It’s not really any harder than this and we can already see these models working for the Film and TV businesses.

Since Spotify launched in 2010 the music business has been in an existential crisis. Convinced that ad-supported unlimited free access to on-demand music would ultimately grow recorded music revenues the major labels opted into what may be their worst decision ever. This decision aided by an estimated 18% (or more) equity position in Spotify has not grown overall music revenues over the past five years. In fact, for the year ending 2014 global revenues reported by the IFPI stated that revenues were at the lowest point in decades. So what to do?

And this is who the record business is taking notes from? Perhaps that’s why Universal is restructuring. This may have seemed like a good idea to some senior executives but it turned out to be a complete disaster. Time to change.

Despite moves in the right direction by Tidal and Apple Music the optics for both of these companies at launch of their respective streaming models have been somewhere between missteps and an absolute disaster. Dismissing for a second that both Apple and Tidal could be the targets of public relations campaigns by competing corporations such as Spotify, Pandora and Google (YouTube) let’s look at what each is offering. Tidal and Apple Music offer nounlimited ad-supported free access to on-demand music. That means no business to those selling advertising… like, Google.

There is nothing more important to the future of the recorded music ecosystem than removing the unlimited ad-supported free access to on-demand music.

For all intents and purposes even free streaming is ownership and here’s how you can tell. If you can chose it, and access it, you essentially own it whether you pay for it or not. Streaming replaces ownership at the consumer level but does not compare to ownership on price. At some point there needs to be a market correction to properly value music consumption.

The launch of Tidal should have been a rallying cry for all artists to support a business model that limited free streaming, incentivized paid subscriptions through exclusive offerings and diversified consumer experiences with higher quality streaming formats. This is the model we should be focused on. As the Buddhist saying goes, “trust the teaching, if not the teacher.” In other words it doesn’t matter if you don’t like Jay-Z and Madonna. And securities laws makes the whole stock issue so difficult that Tidal would have been far better off saying they’d pay all participating artists a bonus in the cash from the company’s own stock sales rather than get down the rabbit hole of who gets stock and who doesn’t.

Unfortunately the celebrity that could have united a community, instead divided it through messaging that most would acknowledge appeared to be less than inclusive. Worse, the optics appeared to be elitist whereby those already rich and famous seemed to be more focused on their own fortunes as opposed to a sustainable ecosystem for the next generation of musicians.

Perhaps if each of the artists at the Tidal launch would have appeared with a developing artist they were supporting the messaging and optics would have been more inclusive and more about community than celebrity.

We have to acknowledge what kind of business we want going forward. Clearly, unlimited ad-supported free access to on-demand music is not working. Both Tidal and Apple Music do NOT have unlimited ad-supported free access to on-demand music. So what’s the problem?

Following the Apple Music launch Spotify announced it had achieved 75m global users (we love that, “users” no kidding) and 20m paid subscribers. So let’s look at the numbers in relationship to what Apple Music could bring to the market place. Keep in mind that 55m of Spotify’s user base are NOT paying for the service. Based on reporting we’ve been provided the free tier accounts for 58% of plays which is only 16% of the total revenue.

With all the back and forth between Apple and labels and the announcement last week by NMPA of the publisher’s deal—freely negotiated without government “help” by the way–it’s pretty clear that Apple announced Apple Music without all their ducks in a row contractually. This opened up an opportunity for haters who are just gonna hate. Now that the picture is becoming a bit clearer, we feel more confident than ever that most of the noise is coming from competitors who would like to create yet another consent decree situation but this time for artists and record companies.

So there are a few questions we need to ask about the launch of Apple Music to evaluate the trade-off for eliminating the unlimited ad-supported free access to on-demand music. But before we ask those questions, we need to understand the mechanics of the Apple Music ecosystem.

First, the 90 days free without payment at launch requires the understanding that all consumers will get 90 days free at Apple Music whether they sign up at launch or at any other point later. This means that some people will opt in at launch, some will opt in at some later time. Based on what we have seen of how these streaming subscription services scale we have to ask a few questions.

How many people will have access to opt into Apple Music Streaming on launch? We’ll assume it’s the entire installed user base who upgrade into iOS 8.4. Here’s some back of the napkin math from the iPhone 6 launch when Apple dropped that U2 album into everyone’s Itunes.

According to CBS News 33 Million people of the 500 Million Global Itunes users “experienced” the U2 album. That’s just 6.7 percent of Apple’s reported consumer base.

So what kind of adoption and conversion rate could one expect from the launch of Apple Music? 10 million paid subscribers? 20 million paid subscribers? 50 million paid subscribers? It’s hard to know, but anything north of 20 million pretty much beats Spotify on paid subscribers. And if you are looking for the company that has defined a paid music service, who you gonna call? Apple or Spotify? Who do you trust going forward?

What if Apple is able to convert 30 million or more consumers to paid streaming in only four months when it has taken Spotify five years to acquire 20 million paid?

Of course, Apple should use a couple of bucks from it’s 178 billion dollars in cash reserves to compensate musicians for the consumption of their music during the initial 90 day launch of Apple Music. This would incentivized artists to promote the service as being both fair and artist friendly and give Apple the thumbs up from the people that matter the most, the artists themselves. Apple’s purchase of Beats was a three billion dollar acquisition, so surely there’s enough money in those coffers to pay artists something.

Here’s some more perspective from asymco.com: In 2012, global music revenues were reported at $16.5 billion, with $5.6 billion coming from digital music. Of that $5.6 billion in music downloads, Apple paid labels $3.4 billion for iTunes sales, which is about 60% of the total digital revenues industry wide—IN LESS THAN ONE YEAR.

In 2012, Apple’s transactional digital model created more revenue for artists and rights holders in less than a year in then it took for Spotify to earn almost 6 years.

If we want to break the death spiral of unlimited ad-supported free access to on-demand music we have to embrace the trade-off of offering limited free trial periods as an incentive for consumers to make the switch.

And by the way—compare the classy way that Eddie Cue of Apple handled Taylor Swift compared to Daniel Ek who comes off like a semi-stalker. Who understands artist relations the best?

The problem with ad-supported unlimited free access to on-demand music is illustrated below showing Spotify domestic streams and revenues. It’s just math and it’s time to move on. Apple Music and Tidal are showing us the way.

Since we published the Streaming Price Bible we’ve been getting data submissions to crunch the numbers. According to one set of data it appears Spotify is reporting seven different streaming rates (in a single month). But the most interesting discovery in the data is the percentage of free streaming volume and revenue versus paid streaming volume and revenue.

We knew there were two price tiers (Free & Paid) but we didn’t anticipate discovering the other five tiers, even as limited as they are.

As we had suspected, the majority of consumption is generating the least amount of revenue.

If you have data that looks different than ours, send it our way and let us crunch it. This is the problem when there is such a profound lack of openess and transparency. There also appears to be an overall lack of consistency. Let’s have some real “disruptive innovation” by “sharing” our Spotify statements and comparing the numbers.

[The per play rates noted above are aggregated. In all cases the total amount of revenue is divided by the total number of the streams per service (ex: $5,210 / 1,000,000 = .00521 per stream). Multiple tiers and pricing structures are all summed together and divided to create an averaged, single rate per play.]

We’ve been here before. We know how this story ends as it did previously for both NIN and Radiohead. We remember those experiments too and we remember what was said after that fact.

Let’s be clear: Bit Torrent Bundles is taking advantage of an installed base of 170 million plus users that they obtained for one reason and one reason only–they have a product that they have perfected into the best tool for piracy in history. And understand, this is not just some kid in a dorm room who came up with some software. This is a commercial company that improves and perfects its product and has done so for 13 years. There’s nothing spontaneous about this company that suddenly are shocked, shocked that there is piracy going on with their application. Check out Andrew Keen’s interview with Bit Torrent founder Bram Cohen and Cohen’s unconvincing regurgitation of the Lessig excuses for stealing from artists.

Bit Torrent has been struggling for years to commercialize that installed base whether it’s through selling over 5 billion ads a month in the uTorrent browser or now by a supremely innovative business model–selling downloads. Selling downloads was perfected by iTunes over 10 years ago and selling ads to profit from piracy is as old as Google Adsense. So what’s innovative about Bit Torrent Bundles?

What’s innovative is that having stolen the audience from a vast number of creators, be they artists, film makers, authors, photographers, illustrators, free lancers and others, and from investors in creators, be they record companies, music publishers, book publishers and others, Bit Torrent now wants to sell the distribution channel it stole back to those who are solely responsible for creating it.

This is a form of blackmail, pure and simple. This is why there are unfair business practice laws to protect the public from people like Bit Torrent.

If the artists participating in the Bit Torrent Bundles program are able to overlook Bit Torrent’s history, that is their decision. If they can sleep at night knowing they are profiting from the massive theft of other peoples creations, then bully for them. If they think it’s good logic to compromise themselves for the opportunity to sell to a mailing list of shoplifters, then we’re also looking forward to their solution for 2 plus 2 equals -5. Please show the work.

And most importantly: If these artists think that it’s a good idea to legitimize Bit Torrent without requiring the company to do something about the massive theft they support, then so be it. We get it.

These type of “experiments” generally only work if the artist is someone who has had the benefit of more than a decade of marketing and promotion paid for by a multinational corporation spending millions and millions of dollars. Which is why these artists are also the top tracks being stolen using the Bit Torrent application. If there is logic to this, please let us know. It just looks like the typical Big Tech shakedown.

Why? How much money has Bit-Torrent invested in Radiohead’s career? Zero. But hey, they have distributed hundreds of millions of copies of the bands catalog to consumers without compensating the band a penny. Not one cent. Ev-er. And now they have the brass to charge artists a distribution fee for Bit Torrent Bundles? If Bit Torrent gave the artists the service for free, that would at least make some kind of sense. But as usual, Big Tech just heaps insult on injury on insult.

When BitTorrent takes care of the 99.7% of infringing material they distribute, that will be cause for celebration.

A report from the Guardian suggests the imprisoned activists could be home as early as Thursday

Nadezhda Tolokonnikova and Maria Alyokhina, the two incarcerated members of Pussy Riot, will be released from prison this week, potentially as early as Thursday, according to a report from the Guardian.

The Russian parliament voted Wednesday to approve an amnesty law that would grant reprieve to first-time offenders, minors and women with young children. The deal still must be signed by President Vladimir Putin, which is expected to happen this week.

Like this:

From the forthcoming documentary Unsound: Bad Religion guitarist and Epitaph Records founder Brett Gurewitz talks about how large tech corporations make millions of dollars selling advertising- essentially making people the product, without them even realizing. The promise of free or cheap music is often used to draw eyeballs to websites, apps, and social networking platforms, allowing corporations to make large amounts of money from advertising. The public is generally unaware and happy to have free/cheap music, corporations make tons of money from advertising, but how is the musician benefiting from this?